The Golden State’s Fight Against Economic Inequality

In his first 100 days as California’s new governor, what programs should Newsom prioritize to create a kind of  New Deal against economic inequality? We asked three experts in the fields of inequality and poverty for their ideas. Responses have been edited for length and clarity.

What should Gavin Newsom do the first day he wakes up as governor?

Manuel Pastor: It’ll be very important for Newsom to move forward with the early childhood education work that he’s talking about. This will have a lot of support from [State Assembly Speaker] Anthony Rendon, a lot of support from teachers, parents, etc. Probably some support from elements of the business community as well, particularly when they think of future workers.

Another thing that probably needs to be done early on is to start making more moves toward universal health care. One of the firsts would be to make forward progress on insuring access to Medicaid of undocumented Californians – that’s crucial.

I do think that Newsom should begin to lay the groundwork for a broader conceptualization of portable benefits that can go between jobs in an economy in which job-churning has become the norm. Portable savings accounts — there’s a good start on that with the CalSavers program that [State Senator] Kevin de León [introduced]. I [am also for] revamping our unemployment and insurance to be more like wage insurance. Right now unemployment’s low, but it’s because people are taking on multiple jobs in order to get by.

And moving beyond those first 100 days?

There are two big things that Newsom should be thinking about. The first is how do we lay the groundwork to change the rules by which we can raise taxes? We’re locked in by Prop. 13. It’s completely anti-democratic to require a two-thirds vote at a state level to be able to raise taxes. Surely there’s some sort of movement that could happen there.

Newsom is also going to, in the medium term, need to think about how we actually grow jobs in the middle of the economy. If we’re giving everybody early childhood education but we still have an economy that’s generating high-tech jobs on the one side, and low-wage service jobs on the other, what are we educating people for? There needs to be more of an industrial policy strategy to bring advanced manufacturing and good middle-skill jobs to California. Some of that is what Jobs to Move America is doing, by ensuring that the layout of the transit system and purchase of rail cars and new electric buses finds those goods to be manufactured in California.

All of this plays out against a White House that regards both California and immigrants as threats.

In the 1990s, when the California economy was being fundamentally restructured by the de-industrialization prompted by the collapse of defense spending, and then aerospace, we should have been paying attention to what we needed to do. Instead, people were blaming immigrants and affirmative action and people learning Spanish in school. And the same thing is happening at the national level. Which is that racism is being used to distract people from the fundamental challenges.

One of the things that is really crucial to keep in mind is to keep up racial equity and economic equity in the same breath at all times, or we’ll be led astray again. We need to be looking at these policies not only to whether or not they’re propelling people into jobs in the middle class, but whether or not they’re reducing racial disparities.

Newsom will have his hands full from the start with these challenges – but what lies just beyond the horizon of his first year?

In the year 2010, 11 percent of our population was 65 years old or older. By the year 2060, 26 percent of our population will be 65 years old or older. We have an aging population. We’re going to need a more caring economy, meaning more family leaning benefits for people who want to provide care to their elders. And also better working conditions and training for those who will be taking care of those elders. And we’re going to be facing a big challenge here because immigration into California is actually very slow – and that’s been a large part of that workforce. That’s a big issue.

Another big issue is technology, artificial intelligence, and the changing nature and ubiquity of work: Planning ahead for an economy in which there may be fewer jobs — and certainly an economy where there will be more frequent job changes. Planning ahead for an economy that increasingly relies on innovation and not just replication, not just stamping out the same product but inventing new cutting-edge products. What does that mean in terms of where the state’s research and development dollars go? What does that mean in terms of the public benefits from those research and development dollars to support innovation? How does that get threaded with our efforts to address climate change and promote a green economy? There is an immediate need to think long term.

Do you have any personal advice for Newsom?

We like things neatly tied into, “What’s the one thing Gavin can do?” Here is my answer: He better not just do one thing.

What kind of programs should Newsom be looking at?

Ann Stevens: I would pick three areas. First, it would be extremely easy and extremely smart to put some real resources into a major expansion of the state earned income tax credit. It really is a program that works. California is a very high-cost state but we still have a lot of fairly low-wage workers. Taking the federal EITC and adding onto it – making California’s [share] 50 percent of the federal [EITC], or matching the federal, would be kind of revolutionary but also really easy. It’s not complicated to do and everyone understands it.

The second is the state also has an incredible structure with its system of community colleges. There’s good evidence that these institutions can be very effective if workers and students can get to them and get through [their] programs — but they’ve really suffered in terms of funding. Increasing funding and really stabilizing funding to the state’s community colleges, especially if we end up in another recession, is another critical investment.

The third is more traditional, but over the course of the Great Recession the state allowed or chose to let its very basic safety net fall — in particular CalWORKs — and so restoring those grant levels to something that gets a family in short-term need closer to the poverty line is, again, kind of a no-brainer. We’ve reformed welfare so [that] we have work requirements, we have time limits. At the same time we let it dwindle so that it barely provides subsistence income.

Can a new governor tackle the poverty afflicting many undocumented immigrants? 

Until there is some change in federal immigration policy, the best the state can do is try to protect [these] populations as best we can — but I don’t think the state can be that effective at moving the dial on the undocumented population as long as we have a really aggressive federal policy.

What happens if income inequality, which affects undocumented immigrants and others on the lowest rungs, isn’t addressed? Are we just stuck with a permanent underclass?

I think the national political moment we’re seeing is a bit of a warning that inequality has unexpected consequences and it can be incredibly polarizing. My own view is that if you’re stuck with it, those problems are going to show up in other places. So for example, single-payer health care and health care in general. As long as you have undocumented people — people who, even despite the expansions, don’t have access to health care — the state and our hospitals and health system will end up paying for that, whether we do something or don’t do something.

How do we motivate our elected leaders to act — through appeals to common sense or moral outrage?

I am not sure moral outrage is effective these days. I would argue there has been a growing consensus at the federal and state levels that the way we should — and can — address poverty is by getting people into work, getting people higher wages. And all of these things I’ve suggested can be tied to people who are taking personal responsibility, people who are in the workforce, or who are trying to get in the workforce. And here is how we can be a partner to those people. Maybe it’s a new New Deal where it’s not just programs that write checks but it’s programs that recognize that even in a healthy economy there are people at the bottom, and we are a state where it’s very hard to live if you’re at the bottom of the earnings distribution.

Can the new governor rely on continuing with the same programs that existed under his predecessor, Jerry Brown?

David Grusky: He should consider some new initiatives.  I would think this is something that he ought to want to take on, and we have the tools to take it on. In fact, there’s been a State Poverty Task Force that’s been working for nearly a year trying to cull the best evidence of what works and what doesn’t.

The task force, set up under Assembly Bill 1520, recommends immediately spending $1.6 billion to help poor children in California. Would these new initiatives also entail major investments?

There’s an increasing line of evidence that shows that, although it sounds obvious, money really matters — not just in taking the parents out of poverty but it matters — even more importantly — for their children.  [Spending has] long-term downstream consequences for children, when parents have enough money to ensure high-quality health care, to ensure that children are not growing up under stress.

What kind of state is Gavin Newsom taking charge of?

The backdrop here is that we think of California as the land of plenty, and it is, but what is not as well known for those who are from Wisconsin, is that there are highly segregated neighborhoods here with lots of well-off folks — and lots of poverty.

Since most poor families in California are working families — and most poor children come from working families — should Newsom push to raise the minimum wage again?

That wasn’t one of AB 1520’s recommendations, but I think mainly because the task force thought it was outside our charge and effectively covered by other constituencies. My own view is that the evidence on behalf of a higher minimum wage, although not entirely uncomplicated, is on balance very strong.  It’s not going to solve all problems but will do a lot of good.

What would we be looking at if Newsom loses this chance to attack inequality — say, because of a new recession or political expediency?

That is a question that I hope he’s asking and that all of us should ask. One of the important roles that California has historically played is being involved in the world. It’s an opportunity to set the standard for what it means to be in a well-off country. But he’s a smart guy, he’s going to resist that pressure.

Can what California does in dealing with inequality be useful elsewhere, or won’t our state’s solutions travel well?

I think that we have a very special role in California. People look to us. Our actions don’t only affect people who live in California, but affect how the rest of the country understands what should be done, and what kind of society do we want to live in. And if California is not leading the way on this issue, who will? We’re gonna lead — I’m confident that we will embrace that role.

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